Profit-Taking Hits Asian Markets, Tokyo Drops 1.4%

Asian markets struggled Thursday, with some investors booking profits in the last days of the second quarter after big gains scored on signs the global economy is starting to recover.

Asian stocks outside Japan are up nearly 30 percent so far in the April-June quarter and poised for their biggest quarterly gain in 16 years, led by a surge in Hong Kong's Hang Seng and bank stocks such as heavyweight HSBC.

Analysts remain divided about whether consumer spending in major economies will kick in later this year and help fuel the pick up in growth. But the renewed confidence among portfolio managers has emboldened them to scoop up shares battered by the crisis last year as hedge funds were forced to dump assets and the global economy skidded into its deepest recession indecades.

The U.S. dollar was little changed and continued to suffer from the rebound in riskier assets and commodity prices that has prompted market players to favor higher-yielding currencies tied to the global economy, such as the Australian dollar . Doubts about the dollar's status as a reserve currency have also hurt the greenback. But leaders from the major emerging economies of Brazil, Russia, India, China and South Africa refrained from mentioning the dollar's reserve role in the communique of their inaugural summit this week, even as Russia pushed the issue. Oil prices were trading at $71 a barrel on gains in inventories and a weaker dollar.

Japan's Nikkei 225 Average fell 1.4 percent, pulling away from last week's eight-month high, as banks such as Mizuho Financial Group tracked their U.S. peers lower, while exporters like Honda Motor fell due to a strong yen versus the dollar.

Hong Kong shares extended losses into a fourth consecutive session, weighed down by concern over ratings downgrades at U.S. banks and the spread of H1N1 influenza. The Hang Seng Index was down 1.7 percent.

Singapore's Straits Times Index was down 1.4 percent. Chinese property firm Yanlord dropped as much as 6 percent after it said it aimed to raise a total of S$503 million (US$345.7 million) through the sale of shares and convertible bonds.